Treatment of Conservation Reserve Program Property and Payments 510-05-75-10

(Revised 7/1/14 ML #3406)

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(N.D.A.C. Sections 75-02-02.1-28(1) and 75-02-02.1-37(3))

Assets: Property enrolled in the Conservation Reserve Program (CRP) is considered property essential to earning a livelihood and is excluded as an asset.

Income.

CRP payments are considered unearned income.

When a CRP contract is set up, the full payment may be received by the landlord or operator, or a portion of the payment may be paid to a tenant of the farm. A portion of the payment is allowed to be paid to a tenant if the tenant was farming the land, or had an interest in the property (e.g. was on the previous contract), in the year before the contract was signed. The CRP contract specifies the amount of the payment and to whom the payment is made.

For purposes of determining eligibility, only count the share the applicant or recipient receives per the CRP contract.

Expenses.

Actual maintenance expenses, up to $5 per acre per year, which are not reimbursed (e.g. by ASCS), may be deducted from the gross CRP payments. Actual maintenance expenses are those expenses necessary to maintain the property according to the CRP contract, such as seed, spray, etc. Allowable maintenance expenses do not include property taxes or insurance.

When the CRP contract requires more extensive maintenance or preparation, the $5 per acre can be exceeded by actual verified expenses up to the NDSU Extension rate established for the area.

When the applicant or recipient receives 100% of the payment, the allowable expenses that are not reimbursed are allowed. When the applicant or recipient only receives a percentage of the payment, that same percentage of the allowable expenses is allowed. For example, if 90% of the payment is received by the applicant, then only 90% of the allowable expenses can be allowed as a deduction.

Disqualifying transfer of CRP income.

When a landlord/operator who is applying for Medicaid for nursing care services is not receiving 100% of the CRP payment, a determination needs to be made whether there was a disqualifying transfer of income. Follow these steps to determine if a disqualifying transfer occurred:

Determine whether the contract was set up or renewed within the look back period. If not within the look back period, there is no disqualifying transfer.

If within the look back period, determine if the tenant was farming the property, or had an interest in the property, in the year before the contract was signed. If the tenant was not farming the property, or did not have an interest in the property, the amount of the payment going to the tenant is a disqualifying transfer of income.

If within the look back period and the tenant was farming, or had an interest in the property, determine if the landlord receives at least 90% of the payment. If not, a disqualifying transfer is considered to have occurred unless the landlord can show that fair value was received for the excess payment (i.e. the cost for the regular maintenance of the property equals the higher percentage).

If it is determined that a disqualifying transfer of income did occur, the amount of the disqualifying transfer is calculated by establishing the value of the payments transferred. Following is an example showing how a disqualifying transfer would be applied.

Example : Property was put into a CRP contract within the look back period. A tenant was farming the property in the year before the contract was signed. The contract pays $10,000 per year and the tenant receives 50% of the payment. There is nothing showing that the tenant should receive more than 10% of the payment and the landlord is applying for Medicaid. The tenant receives $5000 of the payment each year, but should only receive $1000. The amount of the disqualifying transfer, which occurred when the contract was signed is $4000 multiplied by the number of years (10) in the contract, for a total of $40,000.